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Ontario ruling sheds light on massive scam targeting law firms

Details of an international scam targeting law firms in Canada and the United States that bilked them of an estimated $70 million are slowly emerging in court actions on both sides of the border.

At its core is a wide-ranging probe of advance fee collection fraud schemes launched in 2008 that involved the United States Postal Inspection Service, the Federal Bureau of Investigation, the U.S. Secret Service, the Toronto Police Service, the Royal Canadian Mounted Police, the Nigerian Economic and Financial Crimes Commission, and the U.S. attorney’s office for the middle district of Pennsylvania.

In a disclosure motion prior to her extradition hearing, one of the accused, Yvette Mathurin of Brampton, Ont., claimed her rights under the Canadian Charter of Rights and Freedoms were infringed during the police investigation. In his decision last month, Justice Michael Quigley of the Ontario Superior Court of Justice denied her claim.

“The Canadian authorities have to establish there’s enough evidence for her to stand trial,” says Mathurin’s lawyer, Boris Bytensky, of the extradition hearing set for July.

Meanwhile, Emmanuel Ekhator of Mississauga, Ont., and Benin City, Nigeria, awaits his sentencing hearing scheduled for June 3 after pleading guilty in Harrisburg, Pa., to criminal conspiracy to commit mail fraud and wire fraud. Authorities arrested Ekhator in Nigeria in August 2010 and extradited him to the United States in August 2011. He faces up to 20 years in a U.S. prison.

In the January plea agreement, Ekhator admitted to being a leader of the sophisticated scheme and took responsibility for losses ranging between $7 million and $20 million. As part of the arrangement, he forfeited property in Canada and the contents of several bank accounts in Nigeria, according to a press release issued by the United States attorney’s office.

U.S. prosecutors say conspirators contacted U.S. and Canadian law firms by e-mail claiming to be individuals or businesses outside North America looking for legal representation to collect money owed to them in the United States. Often, the prospective clients said the money owed came from a real estate transaction, tort claim or divorce settlement.

Someone representing the debtor agreeing to pay the outstanding debt would contact the retained firm and mail a cheque. The law firm would then contact another person posing as a bank employee, whose phone number matched the one on the cheque, and advise that the cheque was valid. The firm would deposit the cheque into its trust account and wire the money to the purported client.

Eventually, the cheque would come back as counterfeit, resulting in a loss to both the firm and the bank.

Authorities accuse Mathurin of posing as the bank employee who told the law firms that the fake cheques were valid, according to a review of the facts contained in Quigley’s April 30 decision.

The investigation, launched in the United States, tracked e-mail and Internet protocol addresses used in the scam. Through the Toronto strategic partnership, an official working arrangement between Canadian and U.S. law enforcement, Toronto police helped locate subscriber information.

Toronto police and the RCMP launched a parallel investigation in Canada. They found letterhead in Ekhator’s trash matching documents sent to U.S. law firms, according to the facts contained in last month’s Ontario Superior Court of Justice decision.

Authorities searched Mathurin’s home and an officer interviewed her at a Peel police station. The investigation ran in conjunction with Project Infinity, a probe conducted by the Toronto strategic partnership into the activities of an African criminal network believed to be operating in the Greater Toronto Area and active in a series of mass-marketing frauds. Police determined there was a link to the scam involving the law firms.

Assistant U.S. attorney Christy Fawcett, who’s prosecuting the case, says the investigation is ongoing. In addition to Mathurin and Ekhator, another indictment charging four individuals has been returned to a grand jury. Authorities arrested one person on his way to the United States from Nigeria. The indictment remains sealed because the other three haven’t yet been arrested and requests to extradite them from Nigeria are pending.

The grand jury has charged two others in separate, sealed indictments. Fawcett says both of them are in Canada.

“They’re all involved in a large, loose conspiracy,” she says. “Many of them have ties to Canada.”

While the total loss is an estimated $70 million involving about 80 victims in both the United States and Canada, Fawcett says that’s a rough figure that might increase as more information becomes available. An attorney, in fact, reported a $200,000 loss this past week.

In her motion argued at the Ontario Superior Court in December, Mathurin claimed Canadian police violated her rights when they shared the evidentiary product with U.S. officials by obtaining a production order and search warrant through the Criminal Code when they should have gone through the Mutual Legal Assistance in Criminal Matters Act.

She also claimed police got information against her unlawfully because disclosure wasn’t full and frank and they didn’t report back to the justice after obtaining the evidence.

“In my view, the ROC [record of case] and SROCs [supplemental records of the case] here establish that the Canadian evidence was gathered during an investigation that was lawfully undertaken by Canadian authorities under the authority of orders that were lawfully obtained under the provisions of the code based on full and frank disclosure,” wrote Quigley on April 30.

“Nothing has been put forward by the applicant, in my view, that undermines the legality of the production order or the search warrant obtained in accordance with Canadian law and I am not persuaded there was any need to invoke the [Mutual Legal Assistance in Criminal Matters Act] to obtain that evidence.”

Greed

Cont 4: However, most bank require notification within 30 days if there is any dispute with respect to cheques, and such fraud found by the company months later would mean that the company loses, the lawyer makes his 20% and the fraud artists get 80%.

Therefore, ALL companies or individuals when reconciling their bank accounts every month SHOULD also check payee names (not only look at dollar amounts to reconcile) against their records to make sure that payee to be issued to is same as the come cashing. Also, DO NOT LET employee issuing cheques to reconcile them. And notify your bank within 30 days (in Canada) of any irregularity or else you will suffer the loss yourself.

Be vigilant in face of massive fraud (over 70 million dollars) and growing day by day.

Cont 3: In about 15 minutes she called to say that the cheque, although signature and the amount issued was legit, the payee was not legit. A week later she told me that an employee had written a different name than what it should have been paid to.

So although the cheque did not return NSF (the 45 days waiting period is ineffective to prevent what they did to me), any chequs cashed with forged payee name would have to be returned, but by that time the monies have already been shipped to the fraud artist. Best is to check with the issuer as well, not just to any employee but to a senior management person.

cont 2: I held off paying for three weeks (despite furious emails demanding their payment with threats of reporting me the Law Society), and my bank assured me that if it was to return NSF it would have been returned and that the deposit is good cheque. I felt that something is remiss. So I called the (issuing) bank, to inquire if the cheque paid was ok. At first the manager told me that the cheque was drawn by a very reputable company and that it is good. She resisted to call the company who issued the cheque and I asked her for her details telling her that I would release the monies at her risk in case something turned up. At that she agreed to receive a copy of the cheque by fax from me and she said she would call the company accountant to confirm the validity of the cheque.

I too received an email for collection. I decided to bait them and see what happens. Lo and behold, I received a cheque within a week of writing the collection letter. The retainer stated hat I can keep 20% of all monies collected and to return the balance to them. In Canada cheques deposited issued out of another Canadian bank generally returns NSF within a week. (to be continued)

Aha! Being paid 20% after sending a single demand letter for, say, $200,000 and then getting a cheque for that amount in your hot little hand after a week must seem like some sort of heavenly reward! It's the dream of unearned wealth! As with the Nigerian Scam, society needs to protect the victims, in this case lawyers, FROM THEMSELVES!

I'm puzzled. Let's look at this step by step. A lawyer is hired by someone they do not know to collect on a debt.But the lawyer does not really have to do anything because the "debtor" will mail the lawyer a cheque for the amount of the debt. Stop right there. Why is the lawyer being hired in the first place? The debtor can just send the money straight to the creditor.

The lawyer receives the cheque and phones the number on the cheque. Whoa! Banks don't usually print branch phone numbers on cheques. And why would a lawyer not courier it over to the bank for certification anyway.It's cheap and easy.

Every lawyer knows how to turn a slow wheel when they feel it necessary to do so. Why such prompt service for total strangers in plainly dubious circumstances? Things don't add up here. Tell us the full story.

The ploy given to the attorney usually states that the creditor has been unsuccessful in its attempts. but believes that a letter from an attorney will solve the problem. To protect yourself, alsways check out the "so-called debtor as many times this debtor is invisible in public records. I also tell these "creditors" that the State Bar requires me to hold on to the money for 45 days befoe disbursing. By that time, the counterfeit cashiers check surfaces. That requirement stops these people in their tracks. There are variations on these frauds, but the result is the same.

Have you ever had a file where in fact a single letter from you shook loose an almost immediate 6 figure plus payment from a debtor? This seldom happens.

There is something more to these events than is being stated publicly. Mr. Fortin hints at it in his reference to the Nigerian Scam. Typically the object of the con is offered some unbelievable inducement to start in on the scam. What are the conned lawyers being offered to handle this simple collection? That might be the explaination right there.

DIGITAL EDITION

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